Can Beauty Bungalows enforce a covenant not to compete against a franchisee?
Beauty_Bungalows Franchise · 2025 FDDAnswer from 2025 FDD Document
15.01 Covenants Not to Compete. During the term of this Agreement and for two (2) years after expiration, earlier termination, or approved Transfer of this Agreement for any reason (and during the term of this Agreement and for two (2) years from the date a person ceases to be an owner, shareholder, member, officer, or director of Franchisee), neither Franchisee nor any of Franchisee's owners, shareholders, members, partners, officers, or directors may participate directly or indirectly or serve in any capacity in any Competitive Business. This covenant not to compete applies: (i) during the term of the Agreement, within any state in which Franchisor or franchisees do business; and after termination of the Agreement within a twenty (20) mile radius from the boundary of Franchisee's Protected Territory, and within a twenty (20) mile radius from any franchised, Franchisor-owned, or affiliated company-owned Beauty Bungalows Studio; (ii) on the Internet; and (iii) on any other Multi-Area Marketing channels used by Franchisor.
This covenant not to compete is given in part in consideration for training and access to Franchisor's Trade Secrets, and which, if used in a Competitive Business without paying royalties and other payments, would give Franchisee an unfair advantage over Franchisor and Franchisor's franchisees. The unenforceability of all or part of this covenant not to compete in any jurisdiction will not affect the enforceability of this covenant not to compete in other jurisdictions, or the enforceability of the remainder of this Agreement.
Source: Item 22 — CONTRACTS (FDD pages 47–48)
What This Means (2025 FDD)
According to Beauty Bungalows's 2025 Franchise Disclosure Document, the franchise agreement contains covenants not to compete that Beauty Bungalows can enforce. During the term of the agreement and for two years after its expiration, termination, or transfer, the franchisee and their owners, shareholders, members, partners, officers, or directors are prohibited from participating in any Competitive Business. This restriction applies both during the agreement and for two years after, covering specific geographic areas and online activities.
The geographic scope of the non-compete includes any state in which Beauty Bungalows or its franchisees operate during the term of the agreement. After termination, the restriction applies within a 20-mile radius of the franchisee's protected territory and within a 20-mile radius of any franchised, franchisor-owned, or affiliated company-owned Beauty Bungalows Studio. The non-compete also extends to the Internet and any multi-area marketing channels used by Beauty Bungalows.
The FDD emphasizes that these covenants are in place to protect Beauty Bungalows's training programs and trade secrets. The document also states that if any part of the non-compete agreement is unenforceable in one jurisdiction, it does not affect its enforceability in other jurisdictions or the enforceability of the rest of the franchise agreement. The franchisee questionnaire also asks if the franchisee understands that they are bound by the non-compete covenants and that an injunction is an appropriate remedy.